WPP De-Risks £140 Million in DB Liabilities

UK-based communications company WPP has de-risked £140 million ($193.4 million) of defined benefit liabilities carried by its five pension plans with the Pension Insurance Corporation (PIC), a specialist insurer of defined benefit pension funds. The pension insurance buy-ins cover pensioner and deferred liabilities.

“This was a complicated transaction,” said Peter Docking of Independent Trustee Limited, the Trustee Chair for each of the five pension plans, in a release, adding that the move helps the company “achieve our aim of securing the benefits of pension scheme members.”

PIC said the “innovative transaction” simultaneously secures the pension payments of the five pension funds sponsored by WPP, continuing a trend of FTSE100 companies that have de-risked their pensions through insurance.

“The bulk annuity market is currently undergoing a period of intense demand,” said Mitul Magudia, PIC’s head of business development, “and we expect more such high-profile transactions in 2018, in what many believe will be an exceptionally busy year.”

PIC said that midway through 2017, the company had insured 145,400 pension fund members, and had £24.2 billion in financial investments accumulated through pension insurance buyouts and buy-ins to UK defined benefit pensions.

A report released last month by London-based consulting firm Lane Clark & Peacock forecast a run-up in pension de-risking actions in 2018, due to the improving funding levels of some of the UK’s largest pension funds. The number of FTSE 100 pension plans estimated to exceed an 80% funded level has nearly doubled over the past two years. The report also found that 20% of the pension funds among the FTSE 100 companies were more than 80% funded in 2017, up from 13% in 2016, and 11% in 2015.

“As a result of this improved affordability,” said the report, “we predict a marked increase in demand from pension plans to de-risk in 2018, but also an increase in insurer capacity to cater for higher volumes.”